Spotify takes first step towards US market listing

Spotify has filed paperwork with US regulators to become listed on the New York Stock Exchange.

According to both Reuters andtheFinancial Times, the Swedish juggernaut is considering taking a direct listing in the first six months of 2018 to allow some veteran investors to cash out if they so wish. Spotify is valued at around $19bn and, if the plan goes ahead, it would be the first major firm to undertake a direct listing.

This is an unusual way to begin the journey towards an initial public offering (IPO). If the direct listing (as opposed to a traditional float) goes ahead, it may mean some intriguing shifts in the manner in which tech companies choose to go public in future.

The news of the copyright infringement suit filed against the company by music publisher Wixen has many wondering how the legal proceedings could affect the direct listing plan. However, copyright lawyer Luke DeMarte told Reuters that the suit is unlikely to have much of an effect on Spotify’s IPO strategy, adding that he expects Wixen to settle for less than the original $1.6bn damages it is currently seeking.

An unconventional approach from Spotify

Spotify has hired Morgan Stanley, Goldman Sachs and Allen & Co to provide advice on the listing. The music streaming company is said to favour the direct listing approach as it feels it does not have a major need to raise more capital. The direct listing will mean the company can skip much of the red tape around a standard IPO, avoiding underwriting fees and saving time.

A period of rapid user growth has buoyed Spotify, with Statista reporting that the firm had 60m paying subscribers using its platform in July 2017, up from 30m in March 2016. Paying customers only make up a small percentage of Spotify’s overall base of more than 140m users across the world. Apple Music is its closest rival, but it only had 30m subscribers as of September 2017.

Although Spotify operates on a massive scale, it has yet to turn a profit, with music licensing cited as its largest expense.